Question

year	Cash Stream A	Cash Stream B
1	100	200
2	400	400
3	400	400
4	400	400
5	200	100

Find the present values of the following cash flow streams. The appropriate interest rate is 10%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 28 Tool Kit.) Do not round intermediate calculations. Round your answers to the nearest cent.

Stream A =

Stream B =

What is the value of each cash flow stream at a 0% interest rate? Do not round intermediate calculations. Round your answers to the nearest cent.

Stream A =

Stream B =

Answer 1

1.Cash Stream A

Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$0.. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the interest rate of 10%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows of the project is $1,119.40.

Cash Stream B

Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$0.. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the interest rate of 10%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows of the project is $1,148.22.

2..Cash Stream A

Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$0.. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the interest rate of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows of the project is $1,500.

Cash Stream B

Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$0.. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the interest rate of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows of the project is $1,500.

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